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Coronavirus Business Update

April 3rd, 2020

As at 27th March 2020

Here is our weekly update on the Government response to Coronavirus and how it affects you. The sections below broadly correspond to the three main questions we have been asked over the last few days.

 

  1. Can you still work in the event of a total lockdown?

 

Government guidance is not wholly consistent so this is my take. In in doubt stay at home.

If you are lucky enough to have customers who want you to provide services for them (and I do realise that by no means all of you have), then

 

  • If the work can be done from home then that is obviously ok. Many service suppliers, particularly if dispensing advice, can undertake at least some work from home. If you need direct and regular client input that would normally be done face to face then consider whether this can be done remotely by judicious use of Skype or similar. Again I realise not always possible
  • If you need to access commercial premises to work, then:

 

  • If you operate within once of the small number of business sectors allowed to stay open that is fine
  • If you can operate inside commercial premises closed to the public (for example to operate an online delivery service without concentrating large numbers of employees there) then my take is that this is ok. You will obviously have to work out suitable methods of collection that protect both you and the delivery service.
  • If you supply services that require you to attend client premises (e.g. gardening) use your common sense. If these can’t be supplied without breaching social distancing guidelines then don’t go but if you will be working by yourself (e.g. in an empty property) then it seems ok to me.
  • Construction is an odd one. The sector is split on whether work can continue or should cease. Your primary concern here should be your health, that of your customers and that of your subcontractors & employees. If in doubt don’t operate.

 

       This is a fairly fluid area and the interpretation of what is allowable changes almost every day. Talk to me if you want but I can only give you educated guesses at this stage

 

  1. Job Retention Scheme – update

 

From previous notes you should know that the JRS is designed to support employees who cannot work because of Coronavirus. These are known as furloughed workers, and the support amounts to 80% of their ‘normal’ salary or wages, up to a maximum of £2500 per month, for a period of three months.

 

  • The following eligibility criteria should be noted :

 

  • The scheme is only open to employees paid under PAYE. ‘Employees’ (usually company directors) paid small salaries below the NI Lower Earnings Limit (LEL) are not covered.
  • Subcontractors paid through the Construction Industry Scheme are not covered
  • Any employee is eligible; this includes company directors / company owners
  • Eligibility applies only to those staff who are not working at all. So you cannot work part-time and claim under the JRS.
  • Training is exempt from the ‘no work’ point above.
  • If you are the director of your own limited company use your common sense – I don’t believe the eligibility critera stop you writing emails, paying bills or undertaking general admin; you just can’t undertake paid work

 

  • The process is not yet completely known but we can say the following:

 

  • Employees must be formally put on furlough, and to be safe that includes you even if you are the only employee. You should write a letter to each affected employee, explaining that they are on furlough from a specific date, and that they will be contacted once the emergency is over. I attach a rather over the top letter you can modify and put on your own headed paper if you wish.
  • Employees who left the employer before 28 February 2020 are not covered. Employees made redundant after that date can be re-employed and placed on furlough but that is at your option not theirs.
  • HMRC is building a new portal to deal with the JRS that is expected to come on line in April and to start making payments by the end of that month. This portal will have been built and tested in a hurry and will be subject to overwhelming traffic in the first few days so I shouldn’t be at all surprised if it crashes under the weight of initial traffic. But eventually everyone will be sorted out.
  • JRS payments are made to the employer. They will be treated as taxable income.
  • I will let you know more details once we have them.

 

 

  • Pay computation. For salaried employees it will be obvious what to claim. For part-time and seasonal employees it is a bit more difficult; the sum you are eligible to claim is 80% of the higher of:

 

  • The wages / salary paid in the same month last year.
  • The average of monthly earnings made in the previous 12 months (or since date of commencement if that is shorter)

 

  1.  Self-Employment Income Support Scheme (SEISS)

 

Government support for the self-employed was announced on 26 March. In summary the intention is for the self-employed to be treated similarly to the employed

 

  • Eligibility
    • You must have traded as a self-employed individual during 2018-19 and to have submitted your tax return for that year. Individuals who started self-employment only in 2019-20 are not covered.
    • You must have traded in 2019-20
    • You must have intend to trade in 2020-21
    • You must have lost trading profits due to Covid-19. If your trade has habitually made losses then you cannot expect a grant.
    • Taxable income from self-employment (i.e. profits) must be <£50,000 per year (see below for how this figure is computed)
    • More than half your taxable income for the basis period (again see below) must have arisen from self-employment
    • You may continue to work without losing access to SEISS though if your profits for 2020-21 are higher than expected you may lose some of the grant (see under point 5 below).

 

  • This can be done in one of two ways

 

  • By reference to your income for 2018-19 only
  • By reference to your average income for 2016-17, 2017-18, 2018-19 (or a shorter period if you started within the period)
  • £50000 annual cap and 50% of total income criteria apply in each case
  • You will be eligible for 80% of your average monthly profit, payable initially as a 3-month single lump sum. Nothing has yet been said but payments after the 3-month period.

 

  • Process

 

  • You cannot apply for SEISS yet
  • HMRC will contact you if they feel you are eligible (no timescale on this as yet) and invite you to apply online. Do not contact HMRC direct.
  • You can only apply through Gov.UK. Beware of scams. If in doubt ask us.
  • Official guidance does not state when payments are likely to be made but the Chancellor has suggested that they would not be made until June.
  • These payments constitute taxable income and will be need to be declared as part of your 2020-21 income.

 

We should be able to help with aspects of your claim as necessary but with the best will in the world I do not think we can do this for free for every client (Longhill is essentially not eligible for more than minimal Government support so we have to earn at least a minimal sum)

 

  1. Summary of existing business support

 

  • If you trade as a sole trader or through a partnership then you may be eligible for SEISS relief provided that your self-employed profit is > 50% of your taxable income and < £50,000 a year
  • If you trade through a limited company then you may get relief under the JRS but only if the company is registered for PAYE.
  • There is no relief for lost dividends arising out of your own limited company. I fear that to some extent this represents HMRC prejudice against small companies and the belief that they are predominantly used by highly paid subcontractors exploiting the tax system.
  • If you have business premises you also may be eligible for small business rate relief and grants of £10,000/£25,000 depending on business sector.
  • VAT and on-account Income Tax payments are being deferred. You have the ability to request payment deferral of other types of tax (e.g. Corporation tax) but this will not be automatic
  • All businesses have the ability to access Government-backed loans interest-free for 12-months

 

I realise that under these proposals some of our clients will be afforded limited relief and some will receive none at all

 

  1. Fallout and enforcement

 

At present the Government approach is broadly to pay first and to worry about strict eligibility criteria. It is an absolute certainty that monies will be paid out to people and businesses who are not strictly entitled to it.

 

I expect HMRC to recruit more enforcement staff over the next 12 months and look at clawing back some SEISS and JRS grants where they believe this to be necessary. Possible circumstances where this might apply are:

 

  • Employers receiving relief under JRS but not passing monies on to staff
  • Traders receiving SEISS but posting better total profits for 2020-21 than the previous two years.

 

The financial cost to the country of making payments to almost every business is staggering. As noted in previous updates we can expect tax rises next year. Indeed the Chancellor has already suggested that he will look at levelling the playing field between tax treatment of the employed and self-employed. This seems to me to mean parity of National Insurance contributions. I do not think that this will be the end of it however.

 

If you have queries with any of this please let me know. Our information is incomplete and we will continue to update you as soon as we can

 

The content of this article is for general information only. It should not be relied on and action which could affect your business or personal circumstances should not be taken without appropriate professional advice.